Australia's No.3 home realtor McGrath to raise $93 mln in IPO

The company plans to use the cash to buy its biggest franchisee for A$52.5 million and fund an expansion into Victoria, Australia's second most populous state, among other areas.Reuters | November 13, 2015, 18:00 IST

SYDNEY: Australia's third largest residential property agent said it plans to raise A$130 million ($93 million) in an initial public offering that would make it the only listed residential realtor and expose investors to a market widely expected to contract.

In a statement on Friday, Sydney-based McGrath Holding Co Ltd said it filed a prospectus to sell a 53.7 percent stake, or 72.1 million shares, for A$2.10 each, giving it a market capitalisation of A$281.8 million.

The company plans to use the cash to buy its biggest franchisee for A$52.5 million and fund an expansion into Victoria, Australia's second most populous state, among other areas.

It plans to list on Dec. 7, rounding off a year when the volume of Australian initial public offerings has collapsed after a record year in 2014. Companies have cancelled or delayed at least A$3 billion of announced listings in a year in which shares have fallen 7 percent.

Adding to the headwinds for McGrath and its shareholders are expectations by many economists that Australia's residential property market will slow or contract after years of double-digit growth as banks hike lending rates to maintain profit growth under tough new capital rules.

In its prospectus, McGrath said a report it commissioned forecast residential sales volumes in the biggest state, New South Wales, will rise in the next two financial years before declining in the fiscal year 2018.

However, it added: "any potential downturn in sales volumes is expected to be shallow, with the anticipated underlying shortage of housing stock in Sydney expected to provide volume support".

The company said its founder, John McGrath, will keep a 27 percent stake, worth A$76 million at the issue price.

Currently, the Goods and Services Tax (GST) is levied at 12 per cent on payments made for under-construction property or ready-to-move-in flats where completion certificate has not been issued at the time of sale.